Business | Economy
Malls mushroom even amid crisis
Trawling an overly air-conditioned mall perhaps defines the Dubai experience, a popular pastime that unites the emirate's mish-mash of cultures.
- By Simeon Kerr and Andrew England, Financial Times
- Published: 00:11 November 11, 2008
- The Dubai Mall opened last Tuesday. Six hundred more outlets are scheduled to open on Tuesday.
- Image Credit: Megan Hirons/Gulf News
Dubai: Trawling an overly air-conditioned mall perhaps defines the Dubai experience, a popular pastime that unites the emirate's mish-mash of cultures.
The launch of the region's largest mall, Dubai Mall, comes at a pivotal moment as Dubai braces for a global slowdown that threatens to deflate the regional business activity and feelgood consumerism of the Gulf's seven-year boom.
Dubai Mall, operated by real estate giant Emaar, sits in the shadow of the Burj Dubai, the world's tallest tower. The mall, too, comes with its own superlatives: the largest retail opening in history, with almost 600 outlets scheduled to open today.
It also boasts an aquarium as a free attraction, a vital factor for success in Dubai's competitive mall business. Almost a third of the mall's area will be handed over to stores new to the region, providing other incentives for shoppers to visit.
That could be bad news for other megamalls in the emirate, such as the Mall of the Emirates, which boasts the region's indoor ski slope, or the geographically themed Ibn Battuta.
"Malls are a zero sum game," says Laurent Gally, retail analyst with Shuaa Capital. "People may visit more than one mall, so it isn't as much traffic loss, but the money spent will come down."
Holding up
Still, consumer confidence in the UAE appears to be holding up in spite of a barrage of negative news about the global economy, sharp declines in regional equity markets and indications that property prices are starting to soften, say analysts.
Himanshu Vashishtha, managing director at Nielsen UAE, which is due to report this month on consumer confidence, says the UAE has ranked in the top 10 of 50 countries round the world and, while others have seen consumer confidence slide, there has been only a marginal decrease in the mood in the Gulf state.
"The majority do not associate the term recession in the UAE context ... [of] those who do, a lot of them do not see it lasting for more than a year," Vash-ishtha says.
But the consumer splurges associated with the boom years of share and property gains may be on the wane, which could lead people to be more sensitive about the choices they are making.
"They will demand some kind of value propositions before they spend their money," Vashishtha says.
But he believes the "foot-flow" into malls will not be drastically affected, with many in the region seeing shopping centres as a means of entertainment.
More brands
Others remain upbeat on the retail sector's pros-pects. The region's retail giant, Alshaya, has seen no reason yet to slow expansion plans.
Mohammad Alshaya, executive chairman of Kuwait based MH Alshaya, says his group will forge ahead with plans to open 450 new stores next year, mainly in the Middle East, which will create 7,000 jobs for the region.
International brands seeking new markets to offset slower growth back home are also approaching the group, he says. Some had done their homework on the region but "now we want to talk, not next year", Alshaya says.
"Others had not thought of going international and they are dependent on their home markets [but] now they are thinking of an opportunity in an emerging market."
But Gally warns that European recession and a stronger US dollar could hit the numbers of European tourists flocking to Dubai, where developers have plans for a vast increase in capacity that were conceived during the good times.
Next year, Dubai is supposed to see the unveiling of three more outlets, including the massive Mall of Arabia, even larger than Dubai Mall.
Dubai is expected to have added 1.2 million square metres of gross leasable area by 2010, almost doubling the 1.5 million square metres open at the end of 2007.
"Unless there is a change to the demographics, the next 18 months could see an interesting scenario - and that's without any slowdown in spending because of general economic conditions," Gally says.
If projects are not delayed, the emirate runs the risk of a glut in the retail space. Retail rents in some locations are already cooling off.
Still, international retailers are yoking themselves to the oil-rich Gulf as a potential oasis from global consumer downturns elsewhere.
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